The Spanish government is set to approve a new package of economic measures this Friday designed to shield vulnerable households and key industries from the fallout of the escalating conflict in the Middle East. In an extraordinary cabinet meeting scheduled for 20 March, ministers will finalise a plan that prioritises “targeted aid” over the broad subsidies from previous crises, according to government sources.

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A Shift from Blanket Subsidies

The move comes as shockwaves from the wider Iran-Israel proxy conflict, which has intensified following the ongoing war in Gaza, continue to exert pressure on global energy and commodity prices. This has raised concerns about a new wave of inflation. Catalan business leaders already feel this worry, fearing the impact on small and medium-sized enterprises. Speaking in recent days, Economy Minister Carlos Cuerpo confirmed that the government would not be reviving the 20-cent-per-litre fuel subsidy. The government introduced that popular measure in 2022 to combat the economic effects of Russia’s invasion of Ukraine but later phased it out. Instead, Cuerpo emphasised that the new plan would focus on providing direct support to the sectors hardest hit by the current crisis, specifically citing agriculture, fishing, and transport.

Targeted Relief and Tax Cuts

The government’s strategy appears to be a more surgical approach, aiming to direct funds where they are most needed. In addition to sectoral aid, Third Vice President and Minister for the Ecological Transition, Sara Aagesen, has also indicated that the government is considering a cut in the sales tax on electricity as part of the package.

However, this focus on tax-based and targeted measures prompted a cautious response from Spain’s main trade unions. The CCOO and UGT have publicly called on the government at La Moncloa to avoid widespread tax reductions. They argue such cuts often benefit higher earners disproportionately. Instead, the unions are pushing for more concrete relief for ordinary citizens, such as government-backed discounts on public transport passes to directly ease the cost of living.

Catalonia Debates Local Response and Condemnation

Meanwhile, local politicians are also debating the war’s political and economic repercussions at a regional level. This week, the Parliament of Catalonia is scheduled to vote on a motion that addresses both the local impact and the international conflict itself. Proposed by the left-wing party Comuns, the motion calls for the creation of a dedicated support programme for Catalans affected by the economic and social consequences of the war.

The motion also takes a strong diplomatic stance, seeking to condemn recent attacks on Iran and Lebanon by the United States and Israel, which it claims violate international law. In a statement reported by the Catalan News Agency (ACN), the party also condemned Iran’s actions as “totally unjustified” and called for the immediate release of all individuals held without cause. The debate in Barcelona reflects the complex domestic politics surrounding the conflict, which recently saw dozens of protesters take to the city’s streets to call for peace.

The special cabinet meeting on Friday will signal the Spanish government’s definitive strategy for navigating the latest global economic storm. By eschewing the blanket-support model of the past, Madrid is betting on a more focused, and likely less costly, intervention. Industries, unions, and regional governments will closely watch the final shape of the package, all grappling with the far-reaching consequences of a distant war.